The coronavirus-induced economic turbulence has subdued India's Q1FY21 securitisation volumes substantially to Rs 7,500 crore, said domestic credit rating agency ICRA.
On a year-on-year basis, the Q1FY21 volumes fell from Rs 50,300 crore in Q1FY 2020. Such a drop in the volumes, is primarily attributable to the disruptions caused by the COVID-19 pandemic, said the rating agency.
"The nationwide lockdown severely impacted the income generation capability of large number of borrowers. This made the investors vary of investing in fresh securitisation transactions given the possible deterioration in the loan repaying capability of retail borrowers," ICRA said in a statement.
"The RBI's loan moratorium policy, though provided relief to retail borrowers, was detrimental to securitisation market as investors stayed away from pools with irregular cash flows in the initial months."
Furthermore, the rating agency said that funding requirements for non-banking financial companies' (NBFCs) and housing finance companies' (HFCs) also declined during this quarter due to lower demand from the borrowers and the increased focus of the on collections rather than disbursements.
"Though the securitisation volumes were significantly lower during Q1FY2021, the market saw an uptick in volumes in June 2020. More than two-third of the total volumes in Q1FY2021 were completed in June 2020," Abhishek Dafria, Vice President and Head - Structured Finance Ratings at ICRA said in the statement.
"We expect the overall volumes to see further increase in the coming quarters supported by the improvement in collections being seen across asset classes that would restore investor confidence. The traction will also be s upported by NBFCs who have already recommenced disbursements, albeit lower a mounts at present, and would utilize securitisation of their pooled assets as a funding tool.
The extension of the partial guarantee scheme of the Gover nment of India upto March 2021 would also provide some support to increase s ecuritisation volumes."
"Nonetheless, we estimate that the annual securitisation volumes should remain significantly lower in FY2021 than the preceding fiscal at about Rs 1.2-1.3 lakh crore given the impact of the pandemic and the lower availability of eligible pools for securitisation."
Besides, commercial vehicle (CV) loans emerged as the leading asset class accounting for around 31 per cent of overall volumes in Q1 FY2021.
"Some of the transactions in this segment were initiated towards end of FY2020 though were executed in the current fiscal. The share of mortgage -backed securitisation transactions continued to shrink. Mortgages, which ac counted for around 48 per cent overall volumes in Q1 FY2019, witnessed a red uction in share to 26 per cent in Q1FY2021, due to exit of a few large-size originators in recent years from securitisation market," the statement said.
"Share of gold loan segment increased to 32 per cent of the total volumes in Q1FY2021 as against 13 per cent in Q1FY2020. Investor appetite for gold loan securitisation was supported by secured nature of the asset class which is also highly liquid security, better yields and stable portfolio performance. The rise in gold prices in the past quarter also improve the loan-to-value ratio from the lenders' perspective reducing chances of any loss."